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Politics

Drivers pay through hose

By TOM ZUCCO
Published May 17, 2007

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Gasoline prices this week reached a nationwide record average of $3.10 a gallon, about 3 cents higher than after Hurricane Katrina devastated Gulf of Mexico oil supplies and shut down the gulf's refineries, according to the Energy Department.

And in Florida, another dubious milestone was reached Wednesday as the average price of unleaded hit $3 even. Even the Tampa Bay area, a long holdout to that $3 barrier, has some stations posting in the low $3s.

So perhaps it's no surprise the House Judiciary Committee's antitrust task force opened the first hearing on oil industry concentration Wednesday by asking, "How did we get into this mess?"

The average U.S. household is spending $1, 000 more per year on gasoline than it did five years ago, according to two consumer groups that testified.

That's an increase of 85 percent, and rural households have been hardest hit because they spend about 20 percent more on gas than urban residents, the Consumer Federation of America and Consumers Union said, citing Labor Department figures.

The average price for regular unleaded gas in the Tampa Bay area Wednesday was $2.94, just 5 cents below the record set in September 2005. And the state average of $3 is just 2 cents below the record set in August 2006. Can we expect relief any time soon?

Yes, but it might take a few weeks. Despite tensions with Iran, violence in Nigeria and America's insatiable appetite for gas, especially as we enter the summer driving season, most analysts say prices will soon plateau. Gregg Laskoski, managing director of AAA Auto Club South, said prices probably will not reach as high as $3.25 a gallon. Laskoski also noted that in four of the last six years, the price of gas in Florida was lower on the Fourth of July than on Memorial Day.

So why the spike in prices?

As they do every year at this time, oil refineries are converting from winter to summer blends. At the same time, they're trying to build inventories for summer demand. What made things worse this year, Laskoski and others say, is that refineries needed significant repairs and upgrades, which slowed the process. Industry officials also cite a decline in gasoline imports and higher demand.

Consumer groups say oil companies are keeping gasoline supplies artificially low so that prices and profits remain high. They also note that 50 refineries have been closed since the 1990s. What does the oil industry say?

Their argument is that America's top four refiners account for less than 50 percent of the country's refining capacity, that the amount of gas being produced is increasing, and that whenever the industry tries to expand refining capacity, it faces opposition from surrounding communities. Industry officials say that as refineries get back on line, gasoline inventories will move higher and prices will begin to drop.

What's the fallout for area businesses?

Small businesses, especially those that rely on trucks and vans, are feeling the pinch.

Bryan Redman, co-owner of Redman Steele Floral Design in St. Petersburg, said he recently had to tack $1 on to his delivery charge to cover rising gas costs.

"You just hope you have three or four deliveries in the same area, " Redman said Wednesday."

How is Congress reacting?

Rep. Bart Stupak, D-Mich., has crafted a bill that would make oil and gas price gouging a federal crime. He questions why gas prices soared even as crude oil prices dropped.

"In April ... crude oil was $7 a barrel cheaper than last year (but) gas prices were almost 50 cents a gallon higher, " said Stupak. "Clearly there's more at play than simply the world crude oil market."

Even if prices level off, is $4 per gallon likely in the near future?

Most analysts say no. "The $4 a gallon average is not in any reasonable person's crosshairs, " Tom Kloza, chief analyst for the Oil Price Information Service said Wednesday.

Why is the average price of gasoline in the Tampa Bay area lower than in some other parts of the state?

Most of it has to do with Tampa being the port of entry for huge supplies of gas. Another factor has to do with a large number of retailers like RaceTrac in this area that can sell gas slightly cheaper because they also rely on food and drink sales.